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Treasurer Loftis calls for special session of state Budget and Control Board, regarding Pension Fund Transparency and Accountability

Treasurer Loftis calls for special session of state Budget and Control Board, regarding Pension Fund Transparency and Accountability

Monday, June 25, 2012

(Columbia, SC) – State Treasurer Curtis Loftis is asking members of South Carolina’s Budget and Control Board to meet in a special session this coming Wednesday, June 27, to discuss information vital to their duties as Trustees of the Retirement System Investment Commission.

As the custodian, Treasurer Loftis is responsible for the safekeeping of the state’s funds. As such, the Treasurer has major concerns with the lack of oversight of the $25 billion public pension funds. “The Investment Commission has fallen short in its accounting, auditing, reporting, contract management, due diligence and fee management responsibilities,” Treasurer Loftis said. “I believe in the old adage, ‘trust but verify,’ unfortunately when it comes to our retirement fund it has been all trust with no verifying and I refuse to allow that practice to continue.”

Treasurer Loftis is requesting his senior staff be allowed to review complex, specialized documents which can be hundreds of pages long. Besides Investment Commissioners, the Commission only allows its own staff to examine the contracts. The Investment Commission prohibits the Attorney General from viewing the files, in addition to lawyers or senior advisors to the Treasurer, Governor, Budget and Control Board and General Assembly.

Among Treasurer Loftis’ concerns:

The Investment Commission is an unelected, appointed body which pays tens of millions of dollars in expenses without proper explanation of those expenses. FY2011 expenses and fees were approximately $340 million.

The Investment Commission pays five times the average amount in investment fees and expenses, but regularly ranks in the bottom 50% of its peers in rate of return.

The Investment Commission avoids reporting most expenses to the State Comptroller by allowing investment firms to pay commission expenses, then subtracting those expenses from the state’s investment proceeds.

The State Treasurer is asked to send millions of dollars to investment firms and is prohibited from seeking the informed advice of his staff lawyer, chief investment officer or chief banker.

The pension fund has never had its own independent audit beyond abbreviated “look-through” audits which lack the scrutiny required for accountability of public dollars.

A national consulting firm has published similar concerns.

“As the only publicly elected member of the Investment Commission, I see its inner workings and I believe there is an urgent need for more transparency and accountability,” Treasurer Loftis said. “I am hopeful a special session of the Budget and Control Board will receive information so they can act to improve the business functions and restore public confidence to this vital agency of our state government.”